Enter the Bear: How Long Will the Carnage Last?

Investors were initially relieved when the US Federal Reserve raised interest rates by 0.5 percentage points last week, although it was “the first hike of this magnitude in more than two decades,” it said FT. The thought was: it could have been worse. Fed Chair Jay Powell appeared to be ruling out an even larger 0.75% gain for now. But it wasn’t long before the “market house soapers” gave way to nervousness about how much borrowing costs would have to rise to combat runaway inflation. The well-known “whip saw” pattern was confirmed again: “strong rallies on some days but even sharper sell-offs on others as confused investors tried to position for the end of easy money”.

Wall Street has now “suffered its worst streak of weekly losses in more than a decade – six straight,” said The Trader in Chronicle of Investors. And so far, it looks like this bear market is far from turning. The flight is increasingly global, Russell Hotten said in The times. Indices around the world “slid deep into the red” earlier this week as worries about China’s slowing growth and the economic fallout from the Ukraine war combined with concerns about central banks’ ability to rein in inflation “without affecting the world’s largest economies.” Plunging the World into Recession’. . Even “diversified” portfolios are uncertain in the current environment, he said The economist. “In America, investing 60% in stocks and 40% in bonds from 2008 to 2021 yielded an average annual return of 11%.” That strategy has lost 10% this year. “Whereas 2021 marked the peak of the ‘everything rally’ in which most asset prices rose, 2022 could mark the beginning of an ‘everything collapse’.”

The big question is how much lower the US S&P 500 could fall, Will Daniel said in wealth. The good news, according to Bank of America strategist Michael Hartnett, is that “bear markets outpace bull markets.” Based on data collected from the last 19 of them, he reckons the S&P 500 “is yet to see another drop of about 25% from current levels.” The bottom, he suggests, could come in October — although “a bottom doesn’t equate to a new bull market for tech stocks,” which are likely “to remain in a bear market for the next two years.” A lot of speculation has already been flushed out of the market as to what is “healthy,” John Authers said Bloomberg. But in the end it’s all about the economy. “If inflation gets under control relatively quickly and the world gets away without a dose of stagflation, then it’s going to be a lot easier to justify paying for stocks.” Expectations moved”, further declines are to be expected. It’s not the happiest of news.